Federal Reserve officials were split at their June 17–18 meeting over how soon and how aggressively to cut interest rates, with contrasting concerns about inflation and signs of economic slowdown. The meeting concluded with a unanimous vote to keep the federal funds rate steady at 4.25%–4.5%, a level maintained since December 2024.
However, the minutes revealed rising internal disagreement, as some policymakers flagged labor market softening and slowing growth, while others worried about the potential inflationary effects of tariffs introduced by President Trump.
Fed Officials Divided on Timing and Extent of Interest Rate Cuts in 2025
The meeting minutes showed that “most” participants anticipated at least some rate cuts before the end of 2025, viewing the inflation caused by tariffs as “temporary and modest.” Still, opinions on timing varied widely. A few officials supported a rate cut as early as the July 29–30 meeting, while others believed no cuts should occur this year.
Fed Governors Michelle Bowman and Christopher Waller have publicly signaled openness to rate cuts soon, contingent on inflation data. Meanwhile, “several” members thought rates were already near neutral levels and that only limited cuts might be necessary.
Fed Split on Rate Cuts as Inflation, Trump Tariffs, and Economic Slowdown Stir Policy UncertaintyFed projections indicated two rate cuts in 2025, followed by three more in the coming years, though the “dot plot” of individual forecasts revealed considerable disagreement. Some officials pointed to a resilient economy and persistent inflation as reasons for caution, while others worried that weakening labor markets might soon require looser monetary policy.
Policymakers acknowledged the challenge of balancing inflation that remains above 2% with a potentially slowing job market, emphasizing the need to remain flexible and data-driven.
Trump Pressures Fed Amid Shifting Tariff Policies and Mixed Economic Performance Indicators
President Trump has escalated his criticism of Fed Chair Jerome Powell, urging more aggressive interest rate cuts and even calling for Powell’s resignation. Despite the pressure, Powell has reiterated that monetary policy will remain independent and unaffected by political demands. The Federal Reserve continues to stress its commitment to a cautious and data-driven approach.
Officials also pointed to the ongoing shifts in Trump’s tariff policies, which are changing rapidly and influencing global trade conditions. Nevertheless, recent economic data indicate that the inflationary effects of these tariffs have been limited so far.
Recent economic indicators have presented a mixed picture. While inflation in May was subdued, with consumer prices rising just 0.1%, and inflation expectations easing, job growth remains volatile. June saw a stronger-than-expected payroll increase of 147,000 and an unexpected drop in unemployment to 4.1%.
However, consumer spending showed signs of cooling, with personal expenditures declining 0.1% and retail sales dropping 0.9% in May. These conflicting signals leave the Fed in a position to remain patient while assessing incoming data before deciding on its next move.
